Spoiler - it's the same old change management / software adoption problem as always 💁♂️
So you're going to want to
List
Check out my tracker spreadsheet here: Perplexity Table
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Perplexity baffles me!
It’s a fast-growing startup that has built a great product and is stirring competitive reactions from the likes of Google and OpenAI.
At the same time, it's sustainable competitive advantage is unclear, and it's saddled with growth expectations attached to a $3B valuation (maybe $9B).
To help wrap my had around Perplexity, I created a running 2 year timeline to understand where they've been and help me think through where they might be going.
Read on for a fully sourced timeline of Perplexity's rise, covering:
We have to learn the bitter lesson that building in how we think we think does not work in the long run. The bitter lesson is based on the historical observations that
- AI researchers have often tried to build knowledge into their agents
- this always helps in the short term, and is personally satisfying to the researcher, but
- in the long run it plateaus and even inhibits further progress, and
- breakthrough progress eventually arrives by an opposing approach based on scaling computation by search and learning.
The eventual success is tinged with bitterness, and often incompletely digested, because it is success over a favored, human-centric approach.
I think about this a lot right now re: Waymo v. Tesla.
I thought the internet moved past the "SaaS is dead" takes months ago. Apparently not!
"SaaS is dead" generates engagement and points to real shifts happening in tech, but at this point it's stale and it's always been wrong.
Here’s why the arguments for “SaaS is dead” don’t hold up:
Millette vs. Nvidia - https://www.404media.co/nvidia-sued-for-scraping-youtube-after-404-media-investigation/
UMG vs. Suno/Udio - https://www.theverge.com/2024/6/24/24184710/riaa-ai-lawsuit-suno-udio-copyright-umg-sony-warner
NyTimes vs. OpenAI - https://harvardlawreview.org/blog/2024/04/nyt-v-openai-the-timess-about-face/
Bartz vs. Anthropic - https://www.reuters.com/technology/artificial-intelligence/authors-sue-anthropic-copyright-infringement-over-ai-training-2024-08-20/
Dow Jones & New York Post vs. Perplexity - https://www.theverge.com/2024/10/21/24275924/news-corp-wall-street-journal-perplexity-lawsuit-copyright-infringement
Only July 25th, 2024 OpenAI announced the SearchGPT prototype, and the twitter-sphere / threads-sphere reacted with "Search/Google is dead!"
I'm not so sure about that for a number of reasons, but OpenAI's own post demonstrates two
You've probably never heard of Doug Shapiro, but he is writing some of the most cogent, grounded pieces on GenAI today.
From his website (bolding is his, not mine)
He is not a futurist. His work is grounded in the very practical challenges of investors seeking returns and executives who must manage change even while balancing the needs of multiple constituencies (employees, investors and customers), combating institutional inertia and running a business.
Read his work
Most new technologies foster improved product performance. I call these sustaining technologies. Some sustaining technologies can be discontinuous or radical in character, while others are of an incremental nature. What all sustaining technologies have in common is that they improve the performance of established products, along the dimensions of performance that mainstream customers in major markets have historically valued. Most technological advances in a given industry are sustaining in character…Disruptive technologies bring to a market a very different value proposition than had been available previously. Generally, disruptive technologies underperform established products in mainstream markets. But they have other features that a few fringe (and generally new) customers value. Products based on disruptive technologies are typically cheaper, simpler, smaller, and, frequently, more convenient to use.
May 6, 2024: Microsoft is building a large AI model that could rival OpenAI.
March 19, 2024: Microsoft hires Inflection founders to run new consumer AI division
March 4, 2024: Microsoft’s Mistral deal beefs up Azure without spurning OpenAI
October 23, 2023: [Matthew Ball] Parallel Bets, Microsoft, and AI Strategies - Great, in-depth read
So Meta continues to do the whole “commoditize your complements” thing with their open-source AI products — what does this do for the competitive landscape, especially OpenAI?
At first blush, it seems like both Meta and Google are better positioned than OpenAI right now
On what plane of competition is OpenAI in better position?
It's not surprising that AltmanCo. is thinking about hardware.
The AI Industry Is Steaming Toward A Legal Iceberg [March 29, 2024]
Section 230 of the Communications Decency Act of 1996 has long protected internet platforms from being held liable for the things we say on them. (In short, if you say something defamatory about your neighbor on Facebook, they can sue you, but not Meta.) This law was foundational to the development of the early internet and is, arguably, one reason that many of today’s biggest tech companies grew in the U.S., and not elsewhere.
Yup, ChatGPT != Facebook.
And as companies like OpenAI argue in legal briefs over whether scraping copyrighted content from the internet counts as theft of intellectual property, they may actually be hurting their case that they aren’t responsible for the content their systems produce.
Some AI companies have argued that their AIs “substantially transform” all the content they are trained on. That means, they argue, that they don’t violate copyright protections, under the doctrine of fair use. If that is true, it would seem to indicate they are “substantial co-creators” of the content they are displaying. That is the point at which a company is no longer merely hosting content, and loses the protection of Section 230, says Ryan.
An interesting bind!
The concept via Strategy Letter V by Joel Spolsky
Once again: demand for a product increases when the price of its complements decreases. In general, a company’s strategic interest is going to be to get the price of their complements as low as possible. The lowest theoretically sustainable price would be the “commodity price” — the price that arises when you have a bunch of competitors offering indistinguishable goods.
So: Smart companies try to commoditize their products’ complements.
If you can do this, demand for your product will increase and you will be able to charge more and make more.
Applied to Facebook via Strictly VC [06-16-23]
Meta wants other companies to freely use and profit from new AI software it's developing, and it's working on ways to make the next version of its open-source large-language model available for commercial use, says The Information. The outlet notes that the move could prompt a feeding frenzy among AI developers who want alternatives to proprietary software sold by rivals Google and OpenAI.
Applied to Apple via Apple Releases AI Research Paper, Apple + Gemini? [03-18-2024]
First, Apple has long been open about core technology undergirding their products, from WebKit (Safari’s browser engine, which was later forked to create Chromium, Chrome’s browser engine) to LLVM (compiler technology that is used throughout the industry) to Swift (Apple’s preferred programming language). It is very much in Apple’s interest to contribute to and benefit from communities around core technologies.
Second, what Apple is very secretive about are products. Ergo, MM1 is not a product for Apple; it’s a model — or a precursor to a model — that will be used by Apple to make products, which the company will be very secretive about! To put it another way, Apple’s isn’t competing with OpenAI here; they are commoditizing a complement (while, not quite, at least not yet, but moving in that direction).
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